ECONOMY-NEPAL: Human Exports Keep Growing

By Marty Logan Reprint | | Print |

Marty Logan

KATHMANDU , Aug 28 2005 (IPS) - Namrata Pandey leaves in 10 days for a job as a domestic worker in Israel but she has an eye to a future move to the United States, a path she says some friends and family have trodden.

The mother of two left her husband a couple of years ago and will now quit her job as a government clerk, which pays about 70 US dollars a month, for one that will provide at least 650 dollars monthly. Her contract is for two-and-a-half years and does not include a visit home.

”Whether I go to the US or Israel, the bottom line is I need money to educate my children,” she told IPS.

In her late 30s, Pandey (who asked that her real name not be used) says six to seven Nepalis leave home each day to work in Israel. It is estimated that 350 citizens depart here daily (130,000 a year) for various countries to earn the living they cannot make in a nation that was already one of Asia’s poorest before being hit by a Maoist uprising 10 years ago.

Last week’s rebel bombing of a textile factory and the pre-emptive shutdown of another enterprise following Maoist threats have again spotlighted Nepal’s reliance on its only booming ‘industry’: the export of labour. But how long can the economy depend on remittances earned by workers who toil in other nations?

”At the local level, remittances help improve living standards by financing greater consumption in households, and enabling better health care, nutrition, housing and education. However, their longer-term impact on developing countries may be questionable if few productive assets are created,” says an article on the World Bank’s website promoting a recent Bank book, ‘Remittances: Development Impact and Future Prospects’.

Among South Asian nations, Nepal was most dependent on money earned abroad in 2003: it chalked up 14.8 percent of the country’s gross domestic product (GDP), according to the article. Four years earlier it was less than 10 percent.

And the upward trend shows no slowdown – the number of workers leaving to work abroad jumped 28 percent from July 2004 to June 2005, according to the department of labour and employment promotion.

Reliance on remittances is not a problem, says one official. The money is ”a very good and stable source of foreign exchange for the country…we will encourage any model which will further facilitate remittances,” Deputy Governor of the Central Bank KB Manandhar told IPS.

”We are not worried about the (possible) negative impact of relying on remittances. We are worried about money coming through illegal channels” instead of the banking system, he added, estimating that hidden cash could total 30-40 percent of the roughly one billion US dollars Nepal annually earns from remittances.

Earlier this year the government credited foreign earnings for contributing to an eleven percent drop in poverty over the past eight years. ”We know that most of the people (receiving remittances) initially spend it on food and lodging,” said Manandhar. ”As human beings that is our first priority. Gradually it will go for land or housing purchases. Thirdly it will go for investments”.

According to the World Bank, ”unlike other capital flows, remittances are stable and directly benefit the poor”. Ganesh Gurung agrees. A sociologist who has studied remittances to Nepal for the past six years, he has found the money ”goes directly to the poor man’s household and is used to buy rice and curry… that’s the beauty of these remittances – there’s no ‘trickle down’ effect”.

He has also concluded workers who earn abroad use the money in three ways: to pay off loans they took to go work abroad or for day-to-day survival; to upgrade basic needs, such as putting a tin roof on their house or sending their children to a private school instead of a government one; and to buy land or invest in housing or higher education.

Except for higher education, which Gurung calls a long-term investment, ”there are no productive investments using remittances”, he says. ”I have not seen a big industry that has been established through remittances”.

Gurung, who is affiliated to the Nepal Institute for Development Studies, told IPS the government should be directing remittances into such investments. ”It is not a good strategy to depend on remittances but it is the only option you have left; it is a short-term option during conflict, but we have to maximise the benefits…government must play a positive role”.

In other Asian nations that depend on the export of workers, like the Philippines and Sri Lanka, governments introduce investment schemes to workers before they go abroad. In Nepal, ”key policy makers have seen it as a ‘dirty game’ but haven’t seen that the country’s economy is being supported by remittances,” Gurung added.

Nepal’s business community has also been urging authorities to get more involved, in this case to boost security for industries. Last week Anglo-Dutch firm Unilever closed its plant south of Kathmandu putting 2,000 employees out of work. The consumer goods maker said it could not meet demands from the Maoists, including a pay hike.

Hours later rebels bombed a spinning mill further south, on the Indian border, causing losses estimated at 2.3 million dollars and putting 1,000 employees out of work. Earlier this month tea estates in east Nepal reopened after a month-long ‘banda’ (shutdown) called by unions affiliated with the Maoists, which sidelined 40,000 workers.

Later this week, industrialists will lead a peace rally in southern Birgunj city and demand that businesses be protected as ‘zones of peace’. ”More industrialists of the country are likely to get displaced if efforts are not made in time to stop the continuous attacks of Maoists on the industrial sector,” Chamber of Commerce and Industry President Chandi Raj Dhakal told journalists.

In February 1996 the Maoists launched their war against the state calling for a republican system of government and fair treatment for the indigenous people and Dalits (so-called ‘untouchables’) who make up more than half of Nepal’s 25 million people. Nearly 12,000 Nepalis have died in the conflict.

On Feb. 1 King Gyanendra Bir Bikram Shah Dev imposed a state of emergency and fired the government in part for its inability to defeat the Maoists. The emergency ended officially in April but the king continues to rule and shows no sign of reconciling with political parties or of making peace with the rebels.

The government has also been accused of ignoring civilian victims of the conflict. But it has started one programme-providing loans to Maoist victims, indigenous people and Dalits so they can go work overseas.

Asked if she thinks sending people to work abroad is good for the country Pandey says, ”No one who goes has the capacity to think this way about the country, (but) the money comes back to Nepal ultimately”.